Michael Materasso

Bond investors trying to divine when the Federal Reserve will reduce its unprecedented monetary stimulus are increasingly looking to the riskiest parts of the debt market, which are booming like before the financial crisis.

For all the handwringing over the slowdown in the U.S. economy, the bond market shows there’s less risk of deflation now than before the Federal Reserve’s first two rounds of large-scale debt purchases.

The collapse in price swings of U.S. government debt to a four-year low shows increasing investor confidence that yields will stay at about record lows amid growing competition for a dwindling supply of the safest assets.